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Maspeth Federal Savings and Loan Association v. Fidelity Information Services, LLC

United States District Court, E.D. New York

August 1, 2017

MASPETH FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff,
v.
FIDELITY INFORMATION SERVICES, LLC, Defendant.

          DECISION & ORDER

          HONORABLE WILLIAM F. KUNTZ, II UNITED STATES DISTRICT JUDGE

         In this diversity action, Maspeth Federal Savings and Loan Association ("Maspeth" or "Plaintiff) brings suit against Fidelity Information Services, LLC ("FIS" or "Defendant") for, inter alia, breach of two contracts under which Defendant was to provide Plaintiff with lockbox and remittance processing services. Specifically, Plaintiff alleges that Defendant's lockbox servicing procedures were incompatible with Plaintiffs late fee policy, resulting in the improper assessment of late fees to Plaintiffs customers-fees that Plaintiff ultimately refunded in order to settle a class action lawsuit brought by its customers. Plaintiff seeks to recover, inter alia, the amount of the late fees it refunded as well as attorneys' fees associated with the lawsuit. Defendant now moves to dismiss Plaintiffs Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, Defendant's motion is GRANTED in part and DENIED in part.

         BACKGROUND [1]

         Plaintiff is a federally chartered savings and loan association headquartered in New York that engages in the business of, inter alia, originating and servicing mortgages within the Eastern District of New York. Am. Compl. ¶ 1, ECF No. 13. Defendant is an Arkansas limited liability company headquartered in Florida that provides banking and payment technologies and services-including remittance, lockbox, processing, and conversion services-to banks and other financial institutions throughout the United States. Id. ¶¶ 2-3.

         This case centers on a pair of agreements under which Defendant maintained a lockbox to which some of Plaintiff s customers sent their mortgage payments (or remittances) and provided Plaintiff with remittance processing services. Id. ¶ 11. First, on or about January 22, 2003, the parties entered into the Master Agreement for Provision of Hardware, Software and/or Services ("Master Agreement") and the Lockbox Services Order ("LSO"), both of which were governed by a set of General Terms and Conditions ("2003 GTCs") (together, the "2003 Agreements"). See Cortegiano Decl. Ex. D; Am. Compl. ¶¶ 6, 10. Second, on or about April 30, 2013, the parties entered into the Information Technology Services Agreement ("ITSA") and the Remittance/Lockbox Processing Services Addendum ("RLPSA"), both of which were governed by a different set of General Terms and Conditions ("2013 GTCs") (together, the "2013 Agreements"). See Cortegiano Decl. Ex. E; Am. Compl. ¶¶ 9-10. Together, these agreements governed the scope of Defendant's obligations to retrieve and process mortgage payments made by Plaintiffs customers. Am. Compl. ¶ 11. In addition, although not specified in the parties' agreements, the Amended Complaint alleges Defendant knew or should have known Plaintiff maintained a policy throughout the relevant contractual period that any remittance received by 8:00 P.M. on the sixteenth day of the month when due would not incur a late charge. Id. ¶ 17.

         On or about November 20, 2013, Plaintiff was served with a class action complaint that had been filed by a group of its customers, which asserted causes of action for: (1) violations of the Real Estate Settlement Procedures Act; (2) violations of section 349 of the New York General Business Law; (3) breaches of the implied duties of good faith and fair dealing; (4) breach of contract; and (5) unjust enrichment. See Amended Class Action Complaint ("ACAC"), Friedman v. Maspeth Fed. Loan & Sav. &Ass'n, 13-CV-6295 (E.D.N.Y. Nov. 13, 2013) (Weinstein, J.), ECF No. 17; see also Am. Compl. ¶¶ 24-25. Specifically, the suit alleged, inter alia, that members of the class were improperly assessed late fees by Maspeth even though, under the provisions of Maspeth's late fee policy, their mortgage payments were timely remitted and delivered to the lockbox. See Am. Compl. ¶¶ 26-27. According to Plaintiff, Defendant was solely responsible for servicing the lockbox at all times relevant to the class action lawsuit, and it failed properly or timely process remittances or credit customers' accounts with payment. Id. ¶ 28.

         On or about December 6, 2013, Plaintiff sent a written notice of claim and demand for indemnification to Defendant, which notified Defendant of the class action lawsuit and provided it with a copy of the class action complaint. Id. ¶ 29. On or about December 20, 2013, Defendant acknowledged receipt of Plaintiff s notice, but it neither accepted nor rejected Plaintiffs demand and merely stated it would research the issues in the lawsuit. Id. ¶ 30. As a result, Plaintiff undertook to defend the lawsuit at its own expense. Id. ¶ 31. On or about October 3, 2014, Plaintiff again demanded in writing that Defendant indemnify it for any losses resulting from the lawsuit, including but not limited to any late fees it might refund as part of a settlement, its related attorneys' fees, and any award of attorneys' fees the court might make to the class plaintiffs' counsel. See Id. ¶ 32. On or about October 22, 2014, Defendant notified Plaintiff that it would not indemnify Plaintiff as against the class claims. Id. ¶ 33. Thereafter, the parties engaged in negotiations, but they failed to resolve Plaintiffs claim. Id. ¶ 34.

         On or about December 19, 2014, Maspeth executed a settlement agreement to resolve the class action lawsuit, under which it made available over $200, 000.00 to its customers who were potential claimants in the suit and agreed to pay up to $535, 000.00 in class plaintiffs' attorneys' fees, subject to court approval. Id. ¶¶ 35-36. See generally Stipulation of Settlement, Friedman v. Maspeth Fed. Loan & Sav. & Ass'n, 13-CV-6295 (E.D.N.Y. Dec. 19, 2014) (Weinstein, J.), ECF No. 48-3. On or about April 23, 2015, after a motion on notice and a hearing, U.S. District Judge Jack B. Weinstein approved the stipulation of settlement by order and judgment and awarded $535, 000.00 in legal fees to class plaintiffs' counsel. Am. Compl. ¶ 37.

         On October 20, 2015, Plaintiff filed this action for breach of contract, gross negligence, contractual indemnification, and common law indemnification. See generally Compl., ECF No. 1. On December 24, 2015, it filed an Amended Complaint, which alleges, inter alia, that Defendant breached the parties' agreements by failing properly to service the lockbox and process remittance payments in accordance with Plaintiffs late fee policy, which resulted in the improper assessment of late fees to Plaintiffs customers. See Am. Compl. ¶¶ 17-20, 28, 44-47. The Amended Complaint seeks damages "in an amount not less than $857, 130.95, " id. ¶ 41, consisting of: (1) payments to class plaintiffs' attorneys pursuant to the judgment in the class action lawsuit, id. ¶ 38; (2) payments to qualified claimants who filed claims pursuant to the approved class settlement, id. ¶ 39; and (3) legal fees incurred in defending and resolving the class action lawsuit, id. ¶ 40.

         On March 18, 2016, Defendant filed a fully briefed motion to dismiss Plaintiffs Amended Complaint. See Def. Br., ECF No. 18; PL Resp., ECF No. 20; Cortegiano Decl., ECF No. 19; Def. Reply, ECF No. 21.

         LEGAL STANDARD

         To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting BellAtl Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, " but "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. A complaint must be dismissed where, as a matter of law, "the allegations in [the] complaint, however true, could not raise a claim of entitlement to relief." Twombly, 550 U.S. at 558. In considering a motion to dismiss, the Court must accept all of the non-movant's factual allegations as true and draw all reasonable inferences in the non-movant's favor. Id. at 555. However, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555) (internal quotation marks omitted).

         DISCUSSION

         I. ...


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